Hartsuyker on backpacker tax review

Hartsuyker on backpacker tax review


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The controversial backpacker tax review has officially commenced with federal Agriculture and Water Resources Minister Barnaby Joyce and his Assistant Minister Luke Hartsuyker leading the process.

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Luke Hartsuyker - the Assistant Minister to the Agriculture Minister and Deputy PM Barnaby Joyce - will play a lead role in the backpacker tax review.

Luke Hartsuyker - the Assistant Minister to the Agriculture Minister and Deputy PM Barnaby Joyce - will play a lead role in the backpacker tax review.

Suggested headline: Hartsuyker onto backpacker tax review

By COLIN BETTLES

THE Coalition government’s review of the controversial backpacker tax has officially commenced with federal Agriculture and Water Resources Minister Barnaby Joyce and his Assistant Minister Luke Hartsuyker leading the process.

Mr Hartsuyker has ministerial responsibility for agricultural workforce matters and will seek a balanced outcome for the complex taxation issue that can protect the federal budget balance and maintain seasonal workers in farming and tourism.

The tax on working holidaymakers was due to increase to 32.5 per cent and the tax free threshold of $18,200 removed on July 1.

But a six month deferral was announced during the election campaign after farming and tourism industry groups ran a ferocious public campaign ventilating concerns about negative consequences on seasonal workers due to the higher tax charge.

A statement from the two ministers this week said the review’s outcomes would take the form of a government announcement, ahead of any changes coming into effect from January 1 next year.

Public submissions are due by Friday September 2 as part of public consultation that’s likely to attract a strong response from the farm sector where workplace pressures are already reportedly increasing, due to the tax hike.

Mr Hartsuyker said most people would agree backpackers should pay their fair share of tax while living and working in Australia.

But any change will impact revenue forecasts, with the deferral costing the budget $40 million after the tax increase was initially pegged to raise $540m over three years when first announced in last year’s financials.

“It is important that the revenue implications are considered as part of the review and that’s what the review will be doing; landing at a sensible solution,” he said.

“Backpackers bring substantial tourism dollars into the country which we want to retain and from a workforce perspective they provide an important labour source in both the agricultural sector and the tourism sector.

“I think it’s vitally important that we come up with a solution that addresses the need for revenue and the equity that backpackers, like others, should pay their fair share of tax.

“The 32.5 cents in a dollar rate is clearly a disincentive for backpackers to come to Australia and work while they’re here so I think we need to come up with a reasonable solution and that’s the purpose of this review; to arrive at a middle ground.”

Mr Hartsuyker said he had no preferred view on whether the tax rate should be lowered to 19pc or any other position, as he didn’t want to pre-empt the review’s findings.

He said the government inquiry would be cast wider than the designated tax rate to include other issues like international competitiveness, business red tape underpinning backpacker employment and protections for vulnerable workers.

A significant amount of discussion has already occurred between the government and stakeholders that will help inform the government’s thinking, he said.

“I want to conclude this review as quickly as I can,” he said.

“People who will be travelling to this country want certainty and the agricultural and tourism sectors want certainty with regards to the availability of labour.”

The government has been criticised by its own members for failing to consult properly on the tax increase, before it was announced.

But Mr Joyce said the review was “essential” to ensuring the government’s policy settings continued to meet growing demand for flexible labour, particularly in rural and regional Australia.

He said to help fully capture the views of both agriculture and tourism sectors, Deloitte Touche Tohmatsu had been commissioned to lead the public engagement process.

“The proper application of the long-established tax rate of 32.5pc for non-residents has been raised as a potential disincentive for backpackers to take on roles that are not being met by Australian workers,” he said.

“We have listened to those concerns.”

National Farmers’ Federation President Brent Finlay said the tax increase - which it recommended be eased to 19pc in a pre-budget review - still needed to be axed.

He said the review timeframe was “very short” with only three weeks to put in submissions and an outcome to be announced some time prior to January 1.

“Agriculture relies heavily on backpackers to fill severe labour shortfalls at times of peak activity like fruit picking and harvesting, so to discourage working holiday makers to come to Australia would render some farm businesses unviable,” he said.

“We reiterate the seriousness of these issues for farmers and rural communities around Australia.

“We continue to urge the government to abandon this ill-conceived and damaging measure, which will only hurt the economy in the long-term.”

Cotton Australia General Manager Michael Murray said the announcement of a review did little to guarantee certainty for growers who wanted an assurance it would be “genuinely consultative”.

“Growers will be gutted if, at the end of this process, the backpacker tax in its original form was simply reinstated,” he said.

AUSVEG spokesperson Jordan Brooke-Barnett said the backpacker tax threatened to act as a major disincentive to agricultural workers coming out to Australia.

“It would be incredibly disappointing to see Australia’s growers suffer as a result of a short-sighted policy decision that failed to acknowledge the flow-on effects of having backpackers live and work in regional Australia,” he said.

Mr Hartsuyker said there was a “misconception” about backpacker tax because the 32.5 cents in the dollar rate already applied to non-residents.

“People have been incorrectly under the view that a change was made,” he said.

“The announcement really reflected the law as it stood with regards to the taxation on non-residents at 32.5 cents.

“What was happening was that a very significant number of backpackers were claiming the status of resident to get access to the general exemption which strictly speaking they were not entitled to and the Administrative Appeals Tribunal upheld that, to be so, in a number of cases it heard.

“It wasn’t a change that came in - it was an announcement effectively of the enforcement of the law and the tax law as it was intended.

“This review is about coming up with a sensible middle ground that will benefit the agriculture sector and will be a responsible solution from a budgetary point of view and will benefit the tourism sector.”

The review will address the government’s terms of reference and its four key themes:

  •  Australia’s international competitiveness for backpackers
  • seasonal and temporary jobs and projected growth in agriculture and tourism
  • support for small businesses around engaging seasonal labour, and
  • protections for vulnerable workers
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